Minimum wage increase

The biggest minimum wage boost since the 1980’s took effect in New Zealand on the 1 April 2019. The adult minimum wage increased by $1.20, taking the new legal minimum wage to $17.70 per hour. Ultimately, this means that full time workers will be getting an extra $48 a week before tax.

Employers must be aware that it is illegal to pay employees less that the prescribed minimum wage rate. Employers need to ensure that they are aware of the recent minimum wage increase and are paying their employees accordingly. Furthermore, Employers should also take note of the Labour Government’s proposed continued increases of the minimum wage, and ensure that they are prepared for these changes to continue being made.

The proposal put forward at this stage, will see a minimum hourly rate of $18.90 be introduced by 1 April 2020 and then $20 by the same date in 2021. It is important to note, however, that these indicative rates are subject to each year’s annual review, which will take into account the economic conditions at the time.

Facilitating Minimum Wage Increases

Along with being aware of these changes, Employers need to ensure they have plans in place to facilitate the changes. It has recently been released that hundreds of teachers were paid less than minimum wage this year after the 1 April increase took place. Affected teachers have now been back paid for the under payment, however, the New Zealand Educational Institute (NZEI) have expressed that it was “absolutely abhorrent that teachers were being paid less than minimum wage” in the first place. A spokeswoman for the Ministry has responded, expressing in a statement online that the error “should never have arisen and we sincerely regret that it has occurred, it is not acceptable for any person to be paid below the minimum wage”. This incident highlights the importance of ensuring compliance with the minimum wage increase.

To ensure your business has good records, which is essential if ever audited by a Labour Inspector – a good start is to ensure that employees are advised of the change in their pay rate and this is recorded in writing, this should be done through a draft variation letter for the employer to sign with one letter kept for the employers records and one retained by the employee.

It is also important to note that minimum wage rates apply to all employees aged 16 years and over, whether they work full-time, part-time or casually and whether they are paid a wage for time worked, a salary or are paid commission.

The only exceptions to paying the minimum wage, is for employees who are:

a) 16 or 17 years old, in their first six months with a new employer and the ‘starting out’ wage is applicable; or

b) 16 to 19 years olds who are undertaking ‘training’ therefore the training wage is applicable; or

c) 18 to 19 years old who have been on the benefit for six months or more and the ‘starting out’ wage is applicable.

In all other instances, the minimum wage rates will apply.

Employers should ensure that their payroll systems are updated to reflect the increase in the minimum wage rate.

If you have any questions around the facilitation of minimum wage increases, feel free to make contact with our Workplace Law Team here at Lane Neave.

Workplace Law Team

If you have any queries in respect of the above, or any other workplace law issues, please contact a member of Lane Neave’s Workplace Law Team: